Financial Update (Third Quarter 2009)

Atlanta Fed President Lockhart Addresses Employment Challenges

The nation's economy will likely return to "positive but subdued ... growth over the medium term," while the pace of job growth will be slow, Federal Reserve Bank of Atlanta President Dennis Lockhart said in a speech in Chattanooga, Tenn., on August 26.

At a meeting of the Chattanooga Area Chamber of Commerce, Lockhart discussed his economic outlook, with an emphasis on employment. He said the recession has not only eliminated jobs but has also left many people working fewer hours for less pay. The number of people working part-time for economic reasons has risen more in this recession than in any since the U.S. Bureau of Labor Statistics started tracking that information, Lockhart noted.

Efforts to remove "obstacles" needed
"I believe the economic outlook—including the employment picture—calls for continuing efforts to remove obstacles to the rebuilding of economic strength on solid foundations," Lockhart said. "Chief among such obstacles is the still-constricted bank and securitization credit system, especially those segments that finance small business and households."

In discussing the Fed's policies, Lockhart said, "No policy is certain to improve outcomes, and no policy is without risks. The challenge my colleagues and I face is navigating between the risk that early removal of monetary stimulus snuffs out the recovery and the risk that protracted monetary accommodation stokes inflation expectations that could ultimately fuel unwelcome inflationary pressures."

Pressing for recovery's quality over speed
He said the Fed will deal with that tension in coming quarters as it pursues its dual mandate of price stability and maximum employment. "I believe the overriding concern should be the quality of recovery as opposed to the speed of recovery," said Lockhart, a voting member this year of the Fed's rate-setting Federal Open Market Committee. "The best answer to unemployment is restoration of a healthy, balanced, and growing economy capable of producing sustainable employment."

In closing, Lockhart added that community leaders can help address long-term employment challenges by advancing early childhood pre-K education for three- and four-year-olds, improving public schools, and supporting community and technical colleges.